Factors Influencing The Sources Of Finance

Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 10,000 units, most likely case in which sales = 20,000 units, and best case in which sales = 30,000 units.

In accounting there is much to be learned, about the financial aspects of a business. In the past five weeks I have learned the importance of financial reports and how they relate to the success of an establishment. These reports may include balance sheets and income statements, which help accountants and the public grasp the overall financial condition of a company. The information in these reports is really significant to, managers, owners, employees, and investors. Managers of a business can take and deduce financial

Using the spreadsheet, we found Q* = NORM.INV(.8,500,100) = 584.16. The simulation and newsvendor model give the same optimal stocking quantity.

It follows a strong internal control system for cash. A separate person is appointed to approve all purchases, payroll and any disbursement of cash. At the end of each month company prepares bank reconciliation statement to reconcile cash book balance and bank statement balance. Company keeps proper inventory record system. All these prevent frauds and ensure smooth functioning of the business.

Question 4: Take into account the answer to question 1 and the supplier’s new policy outlined in question 2 and the warehouse’s new policy in question 3. Then determine Low’s new EOQ.

The next task is to provide the optimum number of shoelaces to order, using appropriate cost balancing. The economic order quantity (EOQ) is the order amount that allows for an optimum level of materials at the lowest cost possible. There is a demand ofr 300,000 shoelaces per year. The setup cost is $125 per order. There is a $.10 holding cost per unit. The optimal order quantity recommended is 27,386.13 shoelaces per order, with a maximum inventory of 27,386.13. This means that we will order just the amount of shoelaces needed to fulfill current production orders. The average inventory is 13,693.06 shoelaces. There will be approximately 10.95 orders per year. The annual setup cost is $1,369.31, and the annual holding cost is $1,369.31. This makes the total cost per year $2, 738.61. This decision tool allows us to calculate the correct amount needed per order to ensure that we are lowering operating and holding costs, while keeping production properly stocked.

In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.

6. Outline a plan, based on the information provided in the scenario, which the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term, and the fundamental manner in which each factor influences managerial decisions.

EOQ as described everywhere is “the order quantity that minimizes total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models”. This model uses the following assumptions:

Considering these above mentioned features, to take over the company, it is essential for Joe Jr. to take due attention to a proper approach for inventory management, calculate an appropriate inventory level for each product, making it in line with the company’s business strategy, the market demand in the upcoming period:

When offers of reduced pricing are accepted for equipment, meeting delivery expectations becomes an important part of enhancing the customer experience to maintain satisfied loyal customers. An inventory specialist in the current distribution center would be given the additional task of segregating and maintaining inventory levels to meet the needs of the customer loyalty department.

1) Correct the Economic Order Quantity (EOQ) and Reorder point (ROP) quantities for each of the five items mentioned in the case.

1. Discuss methods (Accounting Policies) your chosen company uses to account for its various items of assets, liabilities, and shareholder equity:

5. From the information we get above, I would recommend an order quantity that can maximize the expected profit, and it can be calculated by the formula below: P(Demand<=Q) = C1/(C1+C2).

Sources of finance refers to the ways of gathering various financial sources to meet the financial needs of the business. Furthermore, it states exactly how the companies are gathering and allocating finance to satisfy the requirements of the firm (Chandra, 2011). Firm either belong to existing or new categories that would need a varied amount of finance to meet the long and short term requirements such as construction, inventory, fixed assets and operating expenses (Hally, 2007).